UK authorities have disposed of the first corporate offence of "failing to prevent bribery", four years after the offence became available.
- Brand-Rex Limited self-reported its acceptance of responsibility for contravention of section 7 of the Bribery Act 2010 ("the Act").
- The company paid £212,800 by way of a civil recovery order, thereby avoiding criminal sanctions.
- A civil settlement was agreed following a self-report to the authorities, thorough investigation by independent advisers and proactive steps to avoid further offences.
- The "adequate procedures" defence was not argued.
- The case highlights the importance of implementing adequate procedures to prevent bribery and the benefits of being proactive in investigating and reporting breaches.
On 25 September 2015, the Civil Recovery Unit in Scotland recovered £212,800 from Brand-Rex Limited ("Brand-Rex") under an agreed civil settlement, after Brand-Rex self-reported the fact that it had benefited from unlawful conduct by a third party.
Brand-Rex develops cabling solutions for network infrastructure and industrial applications. Between 2008 and 2012, it operated an incentive scheme which offered UK distributors and installers rewards, including foreign holidays, for achieving varying levels of sales targets.
This scheme was not unlawful. However, one of Brand-Rex's independent installers (an "associated person" for the purposes of section 7 of the Act) gave travel tickets earned by him under the scheme to an employee of one of his customers; that employee was in a position to influence purchasing decisions in relation to cabling. Staff from this company and individuals connected to them used these tickets for foreign holidays in 2012 and 2013.
Brand-Rex became aware of the issue and engaged external solicitors and forensic accountants to investigate. As a result, in June 2015, Brand-Rex self-reported the matter to the authorities, accepting responsibility for its failure to prevent bribery by an associated person under section 7 of the Act. The civil settlement was calculated based on the gross profit made by Brand-Rex as a result of the misuse of the incentive scheme. Going forward, the company agreed to enhance its anti-bribery and corruption ("ABC") policies and procedures and to engage in an appropriate ABC training programme.
It should be noted that civil recovery proceedings can be instigated against any 'innocent' party that comes into possession of the proceeds of unlawful conduct by another. However, where a party has come into possession of assets or funds (e.g. profits or dividends) which it knows or suspects are the proceeds of crime, it can be prosecuted under the money laundering provisions of the Proceeds of Crime Act 2002.
This case highlights the risks that companies face under section 7 if they do not maintain adequate procedures to prevent bribery by associated persons. Brand-Rex reportedly had ABC policies and procedures in place but did not attempt to assert that they were "adequate"; had it been able to do so successfully, the company would have had a complete defence to a charge under section 7, thereby eliminating any risk of criminal sanction. The case also highlights the benefits of undertaking a full internal investigation into alleged wrongdoing and making a prompt self-report to the appropriate authorities, which was inevitably a major factor in avoiding criminal charges.
The speed with which this matter was disposed of is notable. Four months from a self-report of bribery-related conduct to disposal is believed to be unprecedented and demonstrates that there are clear benefits to be obtained by taking swift and decisive action when matters such as this come to light. However, it is important to remember that whilst it may be possible, in certain circumstances, for a company to avoid criminal sanction by taking appropriate action, this will be the exception rather than the rule – and individuals will always remain at risk of prosecution. Brand-Rex took advantage of a specific voluntary disclosure programme in Scotland, which came to an end on 30 June 2015. This programme is not available in England. If the case had been dealt with south of the border, it is possible that it would have been disposed of by way of a Deferred Prosecution Agreement following the implementation of the Crime and Courts Act 2013 but companies should take note of the fact that the Serious Fraud Office has confirmed that there is an inherent public interest in prosecuting bribery cases.
The key message is that prevention is better than cure. Four years after the Act came into force, now is a good time to:
- refresh ABC risk assessments;
- verify that policies and procedures are in fact "adequate" to meet key risks and that they have been properly implemented, especially overseas;
- conduct refresher training for key management, staff and third parties;
- review ABC due diligence processes in relation to existing and future business partners such as sub-contractors, agents, joint venture partners, etc, and other third parties such as acquisition targets; and
- ensure that ABC compliance is properly resourced and that matters such as Board level engagement and messaging are sufficient and properly recorded.
Doing so in a legally privileged environment may bring a degree of comfort where concerns about deficiencies exist.